Time To Waive Off Farm Loan Waivers? Losses Rise To Over Rs 9000 Crores In Punjab

NPAs (Non-Performing Assets) under the agricultural loan category have risen to over Rs 9,000 crore in Punjab, as reported by The Hindu BusinessLine. This has been attributed to farmers not making repayments to banks due to ‘loan waiver’ announcements made by the Punjab state government.

“Due to debt waiver for small and marginal farmers up to Rs 2 lakh, farmers in the state of Punjab have stopped making repayment of their crop loans and the recovery scenario is being adversely affected,” a report of the State Level Bankers Committee stated. While NPAs were just around Rs 633 crore in the first nine months of 2017, they have increased manyfold to over Rs 8,952 crores in 2018.

In January 2018, the Punjab government headed by Chief Minister Amarinder Singh announced a loan waiver scheme to help around 5.63 lakh farmers. Following this, two more state governments, that of Uttar Pradesh and Maharashtra also announced farm loan waivers. While Karnataka and Rajasthan have announced plans to do so.

Economists have argued that though farm loan waivers provide temporary relief to marginal farmers, they create a moral hazard too. In expectation of these waivers, farmers become reluctant to make repayments to banks, thus causing a rise in NPAs.

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